cloud | More From Less

In March, SCM World released a whitepaper on Collaboration Execution that made me think – why has supply chain not fully harnessed the power of collaboration? According to the whitepaper, collaboration for suppliers involves the sharing of supply and demand information and for customers it means providing availability and lead time information. So, at the highest level collaboration means sharing transactional information up and down the chain. Sharing this information can be accomplished relatively easily, as this information can be gathered in reports and sent via email, shared in a portal or other easy to use methods. You would see quantifiable benefits almost immediately like reducing inventory levels/cost based on demand and higher customer order satisfaction.

But that is just the basic level of collaboration. To fully reap the benefits you have to move past the transactional data. So why has the Supply Chain not fully embraced collaboration? There have been several barriers preventing this from happening. Firstly, the cost associated with integrating systems and creating the necessary infrastructure had limited this type of sharing to only the top tier of the supply chain. Secondly, it is difficult for most organizations to define the value of collaboration past transactional data. Can you really put a number on the value of more effective issue resolution? What about the value of innovation? These hard to define benefits of collaboration often times are the most valuable.

These barriers of the past have since been knocked down with the rise of Cloud Computing, a low cost solution for collaboration. Smaller businesses can now afford to join the conversation. Shared secure portals can be established within a matter of days versus months. By involving the entire chain you can mitigate risk in the entire chain. Most importantly you can create an environment where all parties have similar goals and innovation is encouraged.

Supply Chains are complex and ever changing. Harnessing the knowledge within it would be incredibly powerful.

We have a customer that sells yarn and related products. It is a nice business, a straightforward business. They sell direct in a B2B model and through an e-Commerce website. As I said, it is a straightforward and common model.

The interesting thing about selling yarn and, as it turns out, a lot of other products is the tricky little process of order fulfillment. The process is not the standard FIFO (first in/ first out) model. It is a little more complicated.

Here’s why: Let’s say you wanted to make a sweater and you wanted it to be French Blue. When selecting the yarn to use, you couldn’t just pick any French Blue yarn. All French Blue yarn should be the same, but that isn’t the case. During the manufacturing process the yarn was made against a specific dye-lot. Each run of French Blue yarn is very close to the same, but not exactly the same. So, if you make a French Blue sweater from different dye lots, it will have different shades of French Blue.

There are many products, and therefore businesses, that share this problem. Paint, wallpaper and textiles all come to mind.

Inventory systems have had lot control features in them for as long as I can remember and from a macro perspective they seem to solve this problem. When the warehouse personnel pick the products they just need to make sure they pick from the same lot. Seems easy enough, right? But let’s peel the onion on this problem a little.

Let’s start in sales, seeing as though that is where we see the problem first. A customer calls and wants a specific quantity of product, but it needs to be from the same lot because of color, date of manufacture, etc. Do you have the quantity to fulfill the order within the same lot number?

Say you have the inventory all in one lot number. Great… now how do you book the order? The first step is to ensure the inventory is properly allocated and the available-to-promise information is updated accurately. But you can’t allocate based on FIFO, you need to allocate by the lot number and the quantity to cover the order. Then you need to pick the customer’s order by lot number and then, of course, relieve the inventory exactly the way you picked it.

Sounds like there are a lot of people dependent processes required to get everything perfect. The order fulfillment process has to be perfect for customer satisfaction, to ensure the accuracy of your inventory and for the accounting of cost of goods sold. Makes you nervous doesn’t it?

In other words, you are overriding a typical FIFO rule with an Allocate by Lot Number rule. ABLN? Ok, let’s not create another acronym but if ABLN catches on it started here. For fun I Google’d ABLN… turns out to be a Brazilian consulting company. So this may not get legs and run.

In our quest to simplify supply chain operations we have added the ABLN ( Allocate by Lot Number) functionality across the entire application, to ensure perfect allocation, picking, inventory relief and cost of goods sold. We have even added that lot number to the invoice. Our customers are using this and their customers now have perfectly colored French Blue sweaters.

-MF